Prepare these boring bits of business NOW, to maximise the $$ taxman will leave in your pockets. Here are 10 boring bits of business that business owners can, and should, review to ensure that they get maximum benefit from the tax office.
“As always, these ideas are simply thought starters and you should check with your own advisers about how they may apply to you!”
Top 10 End of Financial Year Tax Tips
1. It’s all about timing! The first boring bit of business is that 30 June falls on a Sunday this year. Hence you should be preparing to complete all your administrative work on Thursday, 27 June. Get all your banking and financial transactions done on Thursday, 27 June. While banking systems typically achieve same day fund clearance, the legal obligation is three (3) days, so don’t rely on funds transferred from Friday the 28th to hit an account before 1 July. If you need to, you can also defer income until the new financial year. In particular this could work where you are invoicing clients for services. Make sure that you prepare and can manage any cash flow effects that this implies.
2. The small business instant asset write-off threshold Really dull and boring bit, but there’s up to $5,500 hiding here. The instant write-off threshold increased this tax year from $1,000 to $6,500, meaning that if you have purchased an asset and it cost less than $6,500, you could be better off obtaining the 100% write off rather than depreciating it. Faster write offs translate to cash flow benefits as you are able to bring forward deductions which reduce your tax bill. If you have been preparing to buy or upgrade office equipment, doing this before 30 June might be a better option.
3. Accelerated deduction for motor vehicles From the 2012-13 income year, the depreciation calculations and thresholds change. Now you can use a $5,000 one-off depreciation deduction for a motor vehicle costing $6,500 or more that you start to use, or have installed ready for use, for a taxable purpose. There are other side calculations involved, but the positive aspect of this initiative is that it applies to both new and used vehicles. For example, you may or could purchase a used car for $14,000; the first year deduction is now $6,350, whereas before these changes it would have been $2,100. That used car is not so boring now… is it?!
4. Entrepreneurs tax offset (ETO) From 2012-13, the entrepreneur’s tax offset can no longer be claimed. So be careful if you’re planning to copy last year’s return.
5. Obsolete stock or capital items Yep!… the most boring bit of business… The Stocktake! The closing value of your stock forms part of your assessable income, so having an appropriate stock level is important and this is the best time to review your levels.
If you have slow moving stock, then the best option most probably is to physically write it off prior to 30 June and to obtain a tax deduction.
For any other stock that you have on hand, you should value it correctly. You can choose to value it at actual cost, replacement cost or market selling price. You should do the same for capital assets that can no longer be used.
6. Write off debtors Similar to writing off obsolete stock, a business can claim a deduction for a debt that was physically written off prior to 30 June. Do not forget to claim a refund of the GST $$ paid to the ATO on the sale, as the GST adjustment is often overlooked. But if you are on a cash basis, you cannot get a deduction as the debt must have been originally shown as income in order for the write-off to be allowed.
7. Pre-pay expenses A common tax deferral strategy is to pre-pay expenses for the next 12 months. Small business can generally obtain a full deduction in the year of the payment, so long as the prepayment is not for more than 12 months and finishes before the end of the following income year.
So things like your premium membership and loan interest are eligible items for prepayment. You should review which of your expenses can be prepaid and whether you have adequate cash flow to take advantage of this strategy.
8. Trustees must make a decision on distributions by 1 July Another boring bit about deadlines. If you run your business as a Trust, then you now need to decide on distributions of trust income by 30 June at the latest. Trustees used to have until 31 August to make a decision, but this concession has been removed.
9. Superannuation There are so many changes in superannuation, its not hard to see why so many people’s eyes glaze over. I’ve listed three boring bits for you to look out for… plus there’s an bonus tip in terms of next year for you.
- Limits have changed on super contributions, so you need to ensure that you have paid as much as you can afford and have stayed under the new limits.
- Be sure your contributions are paid before 30 June into your fund. Depositing with your fund manager IS NOT considered paid into your fund. Most managers make the payment into your fund straight way, but at this time of year I’d give them fie (5) working days. Check with yours.
- You need to ensure that you pay June 2013 SGC payments before year end. While technically due on 28 July, only by paying before 30 June can you lock the deduction into this year.
- Bonus Tip! This has nothing to do with the 2013 Tax year, but this boring bit has costly implications to your wages and salaries expenses. The new level of employer super guarantee from 1 July is more complex than a simple move from 9% to 9.25%. You are obliged to ensure that you and/or staff are not adversely impacted in the take home pay. So how you have employed your staff will form the basis of how you need to manage this increase. For some employers, this may actually result in needing to give pay increases.
10. Last but not least.. See your accountant Your accountant will know what tactics are worth pursuing to best suit your circumstances, so schedule a time prior to the end of the year to review which of these boring bits needs to be done. I hope this list has got you excited… awake at the very least. Check out the ATO website for more boring bits of business that might be worth investigating.
